The korean advertising yearbook 2009

The Korean Advertising Yearbook

2009

XenoOne

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Overview of Economy 4

Analysis on Advertising Spending 15

Trends in the Advertising Industry 33

Marketing Trends 48

Branding Trends 55

Television and Radio 63

Newspapers 76

Magazines 86

Cable TV 94

Sales Promotion 106

Outdoor Advertising 111

Event 118

Space Marketing 123

Internet 127

Public Relations 137

Sports Marketing 146

Culture Marketing 152

Advertising-related Companies 162

Advertising-related Organizations 230

Appendix. Korea's Advertising Related Statistics 235

Table of Contents

The Korean Advertising Yearbook

2009

The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved.

The Korean Advertising Yearbook 2009

● Overview of Economy 004● Analysis on Advertising Spending 015● Trends in the Advertising Industry 033● Marketing Trends 048 ● Branding Trends 055

Part1.Advertising Market Overview

The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved.

4 The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved. >The Korean Advertising Yearbook 2009

●

Economic Survey ●

Overview of Economy By Jaesoo Bae / Economic Activity Analysis Team Leader Research Bureau, The Bank of Korea

The Gross Domestic Product (GDP) in South Korea expanded only at an annual rate of 2.2 percent in 2008. The growth rate was the lowest since 1997 Asian financial crisis or Korea’s foreign cur-rency crisis. This lowest rate was caused by reduced domestic demand whereas export growth showed a decline. Consumer prices showed an average increase of 4.7 percent. The price increase was influenced by a surge in international commodity prices and a depreciation of Korean won. The current account registered a deficit of 6.4 billion dollars for the first time since 1997. The financial markets showed highly unstable movements: interest rates fluctuated sharply, stock prices plunged, and won/dollar exchange rate soared.

Overview

The Korean economy experienced difficulties in 2008.

Economic growth abruptly slowed, as the prices

accelerated sharply and the current account balance

shifted to a deficit. All these downturn trends were

directly related to the impact of the global financial

crisis, a subsequent slowdown of the world economy,

and a surge in international commodity prices. The

financial markets, similarly, showed highly unstable

movements.

As for the real economy, domestic demand slowed due

to a deteriorated economy at home and abroad as well

as a decrease of personal income. The export growth

also weakened due to overseas reduced demand,

consequently the GDP growth stood only at 2.2 percent

which is the lowest since Korea’s foreign currency

crisis. Consumer prices rose 4.7 percent owing to a

surge in international commodity prices and the rise of

the won-dollar exchange rates. The current account

registered 6.4 billion dollars deficit for the first time

since 1997, as deficits continued in the services sector

and the previous surplus of trade balance dwindled

sharply due to the surge in international oil prices (see

Figure 1).

In the financial markets, interest rates fluctuated

conspicuously in the wake of the global financial crisis,

stock prices plunged and the won-dollar exchange rates

soared. These were all influenced by a synchronized

downturn of the global stock markets and an outflow of

foreign investment funds.

There are major worries that in 2009 the Korean

economy will record a negative growth rate because of

the deepening sluggishness of domestic demand under

the influence of the global economic downturn. The

upward trend of prices is expected to decelerate due to

eased demand pressure and declining international

commodity prices, while the current account is likely to

register a surplus in 2009 as the decrease of imports

outstrips that of exports. It is feared that in the

financial markets, the financial intermediation will be

inactive due to an economic slowdown and a persistent

unrest of the global financial markets.

Global Economic Trends

During 2008, the world economy slowed as the global

financial turmoil spread to the real economy. The

advanced economies experienced a synchronized

(Figure 1) Major economic indicators

-81997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

-4

0

4

8

12

16

20 50

40

30

20

10

0

-10

-20

Current Account (right scale)

(billion U.S. dollars)(%)

GDP Growth Rate (left scale)

Consumer Price Infl ation (left scale)

* Source: Bank of Korea, Statistics Korea

5

●

Overview of Economy

The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved. >The Korean Advertising Yearbook 2009

downturn and, in the latter half of the year, growth in

most newly emerging market economies fell back

markedly. Accordingly, the growth rate of the global

economy in 2008 slowed from 5.2 percent in 2007 to 3

percent. U.S. economic growth dropped 1.1 percent due

to a persistent downturn in the housing market and a

worsening credit crunch. The annual growth of the

Eurozone economy registered a negative growth from

the second quarter, exhibiting a growth rate of 0.9

percent. The Japanese economy experienced a

negative growth of 0.6 percent as its export growth

slowed and slow faci l i t ies investment further

deepened, due to global business downturn and yen

strength. The Chinese economy kept up a relatively

favorable growth rate of over 10 percent in the first

half, but it slowed down sharply in the latter half,

owing to lackluster exports. It posted a growth rate of

9.0 percent for the year as a whole. The economies of

Southeast Asian and Latin American countries saw

their growth rates decelerate in the latter half of 2008.

The deceleration was influenced by outflows of foreign

funds and reduced exports in the wake of the financial

crisis and the economic downturn in advanced

countries.

In the international financial markets, following

Lehman Brothers’ application for bankruptcy protection

in mid-September, credit crunch deepened further and

tendencies toward a preference for safe haven assets

and securing liquidity strengthened. As a result, stock

prices plunged in the developed countries, spreads on

corporate bonds surged, and financial institutions’

lending activity cooled rapidly. As financial institutions

in advanced nations aggressively withdrew investment

funds on a large scale, the currencies of newly

emerging market countries softened abruptly as a

result of a shortage of foreign currency liquidity and

some of the countries faced a financial crisis.

International oil prices (Dubai, spot basis) soared to a

record high of 141 dollars per barrel in mid-July.

However, the price plummeted to 37 dollars at the year-

end due to a reduced demand in the wake of the

economic slump in advanced countries, an outflow of

speculative funds from the commodity markets, and a

stronger U.S. dollar. The prices of other commodities

marked a steep overall fall from August (see Table 1).

Economic Growth

World1) 4.9 4.5 5.1 5.2 3.2

Advanced Countries1) 3.2 2.6 3.0 2.7 0.9

United States 3.6 2.9 2.8 2.0 1.1

Eurozone 2.1 1.7 2.9 2.7 0.9

Japan 2.7 1.9 2.0 2.4 -0.6

Newly Emerging Market Countries1) 7.5 7.1 7.9 8.3 6.1

Asia1) 8.6 9.0 9.9 10.6 7.7

(China) 10.1 10.4 11.6 13.0 9.0

Central and South America1) 6.1 4.7 5.5 5.7 4.6

Crude Oil Prices Increase Rate2) 25.2 47.8 24.4 11.0 37.6

(USD/barrel) (33.5) (49.4) (61.5) (68.3) (94.0)

Other Commodity Prices Increase Rate3) 15.2 6.1 23.2 14.1 7.4

Long-term Interest Rates4)

(United States) 4.22 4.39 4.70 4.02 2.21

(Japan) 1.44 1.48 1.69 1.51 1.17

Short-term Interest Rates

(United States)5) 2.21 4.07 5.01 3.24 0.08

(Japan)5) 0.00 0.00 0.45 0.56 0.20

(Eurodollar Interest Rates)6) 2.56 4.54 5.36 4.70 1.43

JPY / USD7) 103.8 117.5 118.8 113.0 90.2

USD / Euro8) 1.356 1.184 1.320 1.459 1.398

Notes:1) Based on figures published by IMF (April 2009)2) Dubai spot price, annual average3) Non-fuel primary commodities index (IMF), annual average 4) Yield on 10-year Treasury notes, at the year-end 5) Yield on 10-year Treasury notes, at the year-end 6) 3-month maturity dollar LIBOR, at the year-end 7) Closing price on the Tokyo market, at the year-end 8) Reuters notice price

* Source: IMF, Reuters, and Bloomberg

(Table 1) Major global economic indicators

Year 2004 2005 2006 2007 2008

(Unit: %)

6

●

Overview of Economy


Trends in Real Economy

In 2008, the GDP growth rate of the Korean economy

registered 2.2 percent, the lowest since the foreign

currency crisis. The GDP growth decline was influenced

by lackluster domestic demand and a slowdown in

exports.

Examining each quarter, in the first quarter GDP

registered a 1.1 percent increase which is lower than

1.3 percent of the preceding quarter. This was

attributed to the listless investment by companies. The

growth rate slowed further to 0.4 percent in the second

quarter as investment continued in the doldrums while

private consumption began to decline. It then slipped

again to 0.2 percent in the third quarter due to the

export decrease. In the fourth quarter, it plummeted to

-5.1 percent, the biggest fall since the foreign currency

crisis in 1997-98, as both exports and domestic sales

shrank sharply following the Lehman Brothers’

bankruptcy filing in mid-September. The year-on-year

growth rate, meanwhile, decelerated progressively

from 5.5 percent in the first quarter to -3.4 percent in

the fourth quarter.

When looked at by component of demand, final

consumption expenditures increased by 1.6 percent, a

steep fall from 5.1 percent in 2007. Private consump-

tion remained weak owing to diminished real incomes

and worsened employment situations. The growth of

government spending also decelerated somewhat from

the preceding year owing to a reduced rate of increase

in social security disbursements.

The rate of increase in fixed investment shifted from

2007’s positive 4.2 percent to a negative 1.7 percent

owing to a deterioration in corporate profitability,

dampened investment spirits and a housing market

slump in the wake of the worsened economic environ-

ment at home and abroad. Facilities investment

decreased by 2.0 percent as investment in machinery

shifted to a decline because of weakness of the

semiconductor business. Transport equipment

investment was sluggish, led by the automobile

industry. Construction investment decreased by 2.1

percent due to a sharp drop in buildings for residential

use which served to offset a slight increase in civil

construction centering on the government sector (see

Figure 2).

Exports of goods and services (in real terms) saw their

growth rate decrease from 12.6 percent in the

preceding year to 5.7 percent, as the growth rate was

affected due to the deterioration of the global economy.

Most strikingly, in the fourth quarter, exports dropped

by 8.9 percent and marked the biggest plunge since the

first oil crisis in 1974. Imports (real terms) similarly saw

their growth rate decrease from 11.7 percent in the

preceding year to 3.7 percent and that growth rate was

influenced by lackluster domestic sales and slower

export growth.

Meanwhile, real gross national income (GNI) decreased

by 0.8 percent, the first decline since the foreign

currency crisis, as real trade losses expanded sharply

owing to a deterioration of trade terms following the

rise in international oil prices and a fall in semi-

conductor prices (see Table 2).

Examining the distribution of national income (Nominal

NI), the labor incomes distribution ratio edged down

from 2007’s 61.1 percent to 60.6 percent as the growth

of compensation for employees lagged behind that of

businesses’ operating surpluses.

The gross savings ratio fell from 2007’s 30.8 percent to

30.7 percent as consumption increased sharply owing

to high inflation as against a slight increase in incomes

following the economic slowdown. The gross domestic

investment ratio rose from 29.5 percent to 31.2 percent

as the slow increase in incomes was outstripped by

accelerated investment in response to a surge in prices

of capital goods.

Looking at the trend of production activities by sector

during the year, both manufacturing and services

registered growth rates only about half of 2007 while Note: 1) Compared to the previous quarter * Source: “National Accounts” BOK

-10Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ

-5

0

5

10 10

5

0

-5

-10

(%) (%)

2005 2006 2007 2008

Domestic Demand (Consumption and Investment)GDPExports

(Figure 2) Economic growth rate1)

7

●

Overview of Economy


construction growth rates shifted to a decline.

Manufacturing industry grew 3.1 percent and that was

a sharp decline from 7.2 percent in 2007. In particular, it

decreased by 11.9 percent quarter-on-quarter in the

fourth quarter, the biggest fall since records had begun.

This reflected the spread of cuts in production in major

industries such as the semiconductor and automobile

industries due to reduced domestic and international

demand. By industry, electr ical and electronic

equipment registered only a single-digit increase in

product ion due to the depressed state of the

semiconductor business worldwide. The growth of

machinery equipment, petroleum, coal and chemicals

also decelerated sharply, influenced by slowing

demand both at home and abroad. However, transport

equipment kept up its robust expansion because of the

steep rise in shipbuilding and that served to offset a

decrease in automobile manufacturing.

In the service industry, the growth rate eased from 5.1

percent in 2007 to 2.5 percent. In particular, it suffered

a quarter-on-quarter decrease of 1.4 percent in the

fourth quarter, the largest since the foreign currency

crisis. Looking at various fields of the service industry,

the growth of the finance and insurance industry

decelerated sharply owing to lackluster stock trans-

actions. The growth of wholesale and retail trade,

restaurants and hotels, as well as transport and

storage business also slowed. This was attributed to

dampened consumer confidence and a slowdown in

freight volume following the economic downturn.

The construction industry shifted from an increase of

2.6 percent in the preceding year to a decrease of 2.4

percent, showing a deepening slowdown. The private

sector shifted to a decline, centering on construction of

residential buildings, and the government sector

continued to be sluggish owing to a steep fall in

construction of non-residential buildings. This served to

offset the slight increase in civil construction.

Electricity, gas and water supply saw their growth

accelerate from 3.8 percent in 2007 to 5.1 percent.

Favorable business in the electricity sector resulting

from improvements in fuel efficiency provided for this

increase. The agriculture, forestry and fishing sector

also saw its growth go up from 4.0 percent in 2007 to

5.5 percent led by the buoyant cultivation subsector.

A look at the proportion of each industry in the GDP

(nominal) shows the manufacturing and service rose by

0.8 percent and 0.3 percent respectively from the

previous year, to 28.1 percent and 60.3 percent. But

both construction & electricity and gas & water supply

(Table 2) Domestic economic indicators

GDP1) 5.2 5.1 2.2 1.1( 5.5) 0.4( 4.3) 0.2( 3.1) -5.1( -3.4)

Final Consumption 5.1 5.1 1.6 1.1( 3.9) 0.2( 2.6) 0.2( 2.0) -3.4( -1.9)

(Private) 4.7 5.1 0.9 1.1( 4.0) -0.2( 2.3) 0.0( 1.4) -4.6( -3.7)

(Government) 6.6 5.4 4.2 1.2( 3.6) 1.4( 4.0) 1.1( 4.5) 1.0( 4.7)

Fixed Investment 3.4 4.2 -1.7 -1.6(-0.5) 0.1( 0.6) 0.1( 1.8) -6.5( -7.3)

(Construction) 0.5 1.4 -2.1 -2.5(-1.9) -0.3(-0.3) 0.1( 0.2) -3.0( -5.6)

(Facilities) 8.2 9.3 -2.0 -0.4( 1.5) 0.4( 1.1) 0.2( 4.3) -14.2(-14.0)

Exports 11.4 12.6 5.7 0.0(11.0) 2.7(11.5) -0.4( 9.3) -8.9( -6.9)

Imports 11.3 11.7 3.7 -0.8( 9.7) 2.9( 8.9) 1.1( 9.0) -14.2(-11.2)

GNI1) 3.9 4.8 -0.8 -1.0( 3.3) 0.9( 2.3) -3.6(-2.7) -1.6( -5.4)

Unemployment Rate2) 3.5 3.2 3.2 3.1(3.4) 3.2(3.1) 3.2(3.1) 3.2(3.1)

Consumer Prices1) 2.2 2.5 4.7 1.3(3.8) 2.0(4.8) 1.4(5.5) -0.3(4.5)

Core Inflation1) 1.8 2.4 4.2 1.4(3.0) 1.8(3.9) 1.2(4.8) 0.9(5.4)

Current Account(100 million $) 53.9 58.8 -64.1 -52.1 -1.3 -85.8 75.2

Exports(customs clearance basis)1) 14.4 14.1 13.6 (17.4) (23.1) (27.0) (-9.9)

Imports(ditto)1) 18.4 15.3 22.0 (28.9) (30.5) (42.8) (-9.0)

Yields on 3-year Treasury Bonds3) 4.83 5.23 5.27 5.22 5.32 5.85 4.68

Yield on 3-year Corporate Bonds3),4) 5.17 5.70 7.02 6.35 6.27 7.19 8.29

KOSPI (end of period) 1,434.5 1,897.1 1,124.5 1,704.0 1,674.9 1,448.1 1,124.5

KRW per USD (end of period) 929.8 936.1 1,259.5 990.4 1,046.0 1,207.0 1,259.5

2006 20072008

Annual Ⅰ Ⅱ Ⅲ Ⅳ

(Unit: %)

Notes: 1) The rate of growth compared to the previous quarter. The figures in parenthesis are year-on-year rates.2) The figures in parenthesis are not seasonally adjusted.3) Average during the period 4) AA- degree basis

* Source: Bank of Korea “ECOS”

8

●

Overview of Economy


fell by 0.4 percent, to 7.0 percent and 1.8 percent

respectively.

As for the employment situation, there was some

deterioration in the labor market conditions due to the

reduced economic growth rate with decreasing

employment opportunities and an increasing number of

people in underemployment.

The number of persons employed during the year fell

sharply from 280,000 in 2007 to 150,000 in 2008.

Specifically in December, the number of employed

shifted to a year-on-year decline for the first time since

October 2003. Accordingly, the employment rate

slightly decreased from 59.8 percent in 2007 to 59.5

percent in 2008. Meanwhile, the number of people in

underemployment, such as part-time workers and

persons willing to work reduced hours, increased

sharply, showing deterioration in terms of employment

quality.

Looking at the number of persons employed by industry,

the service sector decelerated sharply because of

sluggish domestic demand, centering on the business

and personal service. Construction shifted to a decline

due to sluggish housing activity and manufacturing

employment shrank at a faster pace, affected by slow

exports. The agriculture, forestry and fishing industry

continued its structural downward trend, but a

decrease rate slowed from the previous year, thanks to

abundant crops and good harvests.

Despite the reduced tempo of increase in the number of

persons employed, the unemployment rate maintained

the same as 2007 at 3.2 percent owing to the low rate

of participation of people in the younger and older age

groups in economic activity.

The increase in wages (on the basis of regular workers)

slowed down from 5.6 percent in 2007 to 3.4 percent.

By period, wages continued on a robust growth until

the second quarter, but rose by only 3.0 percent year-

on-year in the third quarter, their growth trend

flattening out. In the fourth quarter, wages fell by 1.7

percent year-on-year, the first quarterly decrease since

the foreign currency crisis. Meanwhile, the rise in unit

labor costs (nonfarm-basis) registered 2.1 percent,

higher than 2.0 percent in 2007, as labor productivity

growth slowed down more rapidly than the rise in

hourly nominal wages (see Figure 3). The consumer

price inflation rate reached 4.7 percent, far higher than

2007’s 2.5 percent. This was primarily attributable to

cost factors including a surge in international

commodity prices and the Korean won’s depreciation

against the US dollar.

The movement of consumer prices for each period

shows that the inflation rate rose from 3.8 percent

year-on-year in the first quarter to 4.8 percent in the

second quarter and further to 5.5 percent in the third

quarter which was affected by a surge in international

commodity prices and oil prices in particular. The

increasing trend slowed to 4.5 percent in the fourth

quarter due mostly to a decline in international oil

prices, but the reduction in the speed of inflation was

limited by a sharp rise in the won/dollar exchange rate.

In terms of price rise by category, the prices of

agricultural, livestock and marine products rose by 0.5

percent and that was lower than 2007’s rise of 1.9

percent. The slower growth was due to the fall in

prices of agricultural products in response to bounteous

crops and good harvests. Prices of industrial products

rose sharply from 2.0 percent in 2007 to 7.8 percent, as

prices of petroleum products soared and those of

processed foods and durable goods continued on their

upward trend. Charges for services, similarly increased

by 3.7 percent which is more than 2007’s 2.9 percent

increase, were mostly affected by charges for private

services, including eating out.

Core inflation, which excludes non-grain agricultural

products and petroleum-based fuels from the consumer

price index, rose by 4.2 percent from 2007’s 2.4 percent.

This was attributable to the Korean won’s depreciation

Note: 1) As the statistics compilation method changed in 2008, the fi gures before 2007 use the time series of the previous method of compilation. * Source: Statistics Korea, Ministry of Labor

0Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ

10

20

30

40 10

8

6

2

-2

0

4

(%)

2006 2007 2008

Rate of increase in nominal wages (right)Increase in number of persons employed (left)

(Figure 3) Increase in number of persons employed and rate of increase in wages1)

(Ten thousand people)

9

●

Overview of Economy


against the background of the persistent knock-on

effects from the earlier steep rise in world commodity

prices.

In the real estate market, housing prices rose by 3.1

percent from the end of 2007, the same rate of increase

as 2007. By period, they increased by 1.4 percent in the

first quarter and 2.1 percent in the second quarter over

the end of the previous quarter. The increase was

affected by urban redevelopment projects and

expectations on easing housing-related regulations. As

economic conditions both at home and abroad

subsequently worsened rapidly, the increasing rate of

housing prices stood merely at 0.8 percent during the

third quarter which turned into a 1.2 percent decline in

the fourth quarter. Housing rents rose by 1.7 percent, a

slower increase than 2007’s 2.6 percent. The pattern of

their movements by period mirrored that of housing

prices (see Figure 4).

The current account registered a deficit of 6.4 billion

dollars for the first time in 11 years since 1997 as the

goods account surplus narrowed sharply, whereas the

services account remained in the red.

Exports (customs clearance basis) increased by 13.6

percent to total 422.0 billion dollars, posting a double-

digit increase for the sixth straight year. By period,

exports rose 22.6 percent in the first three quarters,

influenced by rising overseas demand for Korea’s

traditional main export items and a rise in the

international prices of those products. In the fourth

quarter, however, exports shifted to a decline of 9.9

percent owing to the worsening of the global economy.

By item, most items apart from automobiles and

semiconductors turned in an upbeat export perfor-

mance.

Imports (customs clearance basis) accelerated their

growth from 15.3 percent in 2007 to 22.0 percent in

2008, registering 435.3 billion dollars. By period,

imports soared by 34.1 percent in the first three

quarters owing to a surge in the prices of international

raw materials, including crude oil, but shifted to a drop

of 9.0 percent in the fourth quarter, influenced by the

change of international raw material prices due to a

decline and sluggish domestic sales and exports. By

item, imports of raw materials such as crude oil and

grain increased sharply because of the surge in their

international prices, but those of durable consumer

goods and capital goods exhibited a low rate of

increase, affected by slow domestic demand.

Despite favorable export performance, goods account

surplus narrowed from 28.2 billion dollars in 2007 to

6.0 billion dollars in 2008 because the rise in imports

greatly outstripped that of exports. The services

account deficit narrowed from 19.8 billion dollars to

16.7 billion dollars in response to an improved travel

and transportation account position. Meanwhile,

income account surplus widened from 1 billion dollars

in 2007 to 5.1 billion dollars owing to a reduction in

external payments of interest and dividends. The deficit

of current transfers account narrowed.

The capital account balance posted a deficit of 50.9

billion dollars, its first deficit since 2001, owing to

large-scale capital outflows in the wake of the global

Note1) Excludes the prices of non-grain agricultural products and petroleum-based fuels (along with city gas) from the CPI.2) The infl ation target was set in terms of core infl ation rate in 2004-2006 and the increasing rate of CPI in 2007-2009.

(Figure 4) CPI increasing rate and core infl ation rate1) (Compared to the same month in the previous year)

0

1

2

3

4

5

6

0

1

2

3

4

5

6(%) (%)

2004 2008200720062005

CPI increasing rate

Core infl ation rate

↓

↓

↓

↑

2.5~3.5%(Target range)

3.0±0.5%(Target range)

* Source: Statistics Korea “Consumer Price Trends”

(Figure 5) Exports/Imports and Current Account

Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ

1,4001,2001,000

800600400200

0 150100

-50050

-100

(100 million U.S. dollars) (100 million U.S. dollars)

2008200720062005

Exports (left scale)Imports (left scale)Current Account (right scale)

* Source: Korea International Trade Association, Korea Customs Service

10

●

Overview of Economy


financial crisis. For the year to September, it recorded a

deficit of 9.1 billion dollars because of the outflow of

foreigners’ stock investment funds. In the fourth

quarter, the deficit snowballed to 41.8 billion dollars as

foreign exchange banks repaid a large amount of their

short-term overseas borrowings due to a credit crunch

on the heels of the Lehman Brothers panic.

As of the end of 2008, the foreign reserves holdings

amounted to 201.2 billion dollars, a decrease of 61

billion dollars from the end of 2007, affected by the

foreign exchange authorities’ expanded supply of

foreign currency liquidity. Gross external liabilities

decreased by 2.7 billion dollars throughout the year to

380.5 billion dollars, mainly owing to short-term foreign

debts, but their ratio to nominal GDP (dollar basis) rose

from 36.5 percent at the end of 2007 to 41.0 percent.

Meanwhile, net external assets, which represent gross

external assets less gross external liabilities, decreas-

ed by 69.7 billion dollars during the year under review.

This caused the nation to shift to a net external debtor

position for the first time since 1999, with net external

liabilities of 32.3 billion dollars (see Figure 5).

Trends in the Finance and Foreign Exchange Market

In the financial markets, interest rates experienced

wide fluctuations owing to the global financial crisis

and a resultant outflow of foreign investment funds.

Share prices plummeted and the won/dollar exchange

rate soared.

Short-term market interest rates were fairly stable

early in the year thanks to the smooth inflow of funds

into banks, but shifted to an upward trend in the latter

half as the financial market nervousness deepened and

the banks’ fund-raising situation worsened. From

October, the rates shifted to a steep fall as the Bank of

Korea lowered its policy rate to cope with the global

financial crisis. As of the end of the year, secondary

market yields on 91-day CDs stood at 3.93 percent,

down 1.89 percent points from the end of 2007.

Long-term market interest rates showed a decline,

affected by worries over an economic downturn and

expectations of a cut in policy rate during February-

April, but swung to a rising trend in May due to great

concerns over inflation resulting from the hike in oil

prices and exchange rates. After fluctuating within a

narrow range after July, long-term market interest rates

showed a steep decline after the lowering of the policy

rate in October. Consequently, as of the end of 2008,

secondary market yields on three-year treasury bonds

had fallen 2.33 percent from the end of 2007 to 3.41

percent.

Reflecting these movements of market interest rates,

banks’ lending and deposit rates fell for a while earlier

in the year but then rose steadily. After the lowering of

policy rate, however, they shifted to decrease again.

Meanwhile, the spread between long-term and short-

term rates (secondary market yields on three-year

treasury bonds versus those on 91-day CDs) widened

from -0.08 percent at the end of 2007 to -0.52 percent

at the end of 2008 as yields on treasury bonds fell

faster than yields on CDs in the fourth quarter. Apart

from this, the corporate bond risk premium (secondary

market yields on AA- grade three-year corporate bonds

versus those on three-year treasury bonds) soared by

3.28 percent points as from the end of 2007 to stand at

4.31 percent points at the year-end, their highest since

the foreign currency crisis, which was influenced by a

surge in credit risk as a result of the global financial

turmoil.

KOSPI fell from the beginning of the year on widened

net selling by foreigners and the deterioration of the

business performance of major investment banks in the

wake of the subprime mortgage meltdown. From

March, it shifted to an upward trend to post a high of

1,888.9 on May 16, helped by a slight easing of the

international financial market turbulence. However,

with a surge in oil prices followed by the collapse of

Lehman Brothers, the international financial market

turmoil intensified further, precipitating a sharp fall of

the KOSPI to the year’s lowest of 938.8 on October 24.

Subsequently, it pulled out of its steep decline thanks

to major countries’ announcement of market stabili-

zation and economic stimulation measures along with

the moderation of foreigners’ net selling. As a result, at

the end of 2008, KOSPI stood at 1,124.5, which was

772.6 points lower than at the end of 2007, the biggest

yearly decline since the foreign currency crisis. The

KOSDAQ index showed similar movements to KOSPI,

but the scale of its decline was relatively larger. The

11

●

Overview of Economy


KOSDAQ index stood at 332.1 at the year-end, 372.1

points lower than at the end of 2007 (see Figure 6).

The won/dollar exchange rate showed an upward trend

from March in response to a net outflow of foreign

stock investment funds and a current account deficit. In

particular, the upward trend accelerated from mid-

September owing to the worsening global credit

crunch. It reached 1,513 won per dollar on Nov. 24, the

highest rate since March 1998. Subsequently it shifted

to a decrease, influenced by large-scale surplus of the

current account, supply of currency swap funds from

the U.S. Federal Reserve, and the authorities’ efforts to

stabilize foreign exchange market. As of the end of the

year, accordingly, it closed at 1,259.5 won per dollar, a

depreciation of 25.7 percent against the U.S. dollar

from the end of 2007. On an annualized average basis,

the Korean won traded at 1,103.4 won per US dollar,

which represented a depreciation of 15.8 percent from

2007’s figure (see Figure 7).

Throughout the year, the growth of deposit-taking by

banks accelerated sharply as saving deposits soared

following the stock market slump and special sales of

products carrying high interest rates, which counter-

acted the effects of mildness in the rise in short-term

marketable deposits in line with the subdued issuance

of CDs. Meanwhile, the growth of deposit-taking by

asset management companies increased only slightly in

view of sluggish sales of stock-type beneficiary

certificates, offsetting the effects of brisk sales of

MMFs.

The growth of banks’ lending accelerated somewhat as

lending to households swelled markedly in comparison

to 2007, offsetting the reduced growth of corporate

lending. Lending to large enterprises increased sharply,

influenced by the rising demand for funds for M&A. On

the other hand, the growth of lending to small and

medium enterprises slowed as banks tightened their

risk management. The growth of lending to households

accelerated remarkably, led by housing finance loans,

which shrugged off the effects of a shrinking housing

market, thanks to the demand for mid-term and

remaining balance payments for the purchase of

p rev ious l y -a l l oca ted apa r tments and to t he

government’s steps to ease real estate regulations. The

share of household loans in banks’ total outstanding

lending, nevertheless, fell back from 46.4 percent in

2007 to 43.8 percent on a year-end basis as their

growth rate was outstripped by that of household

credits.

Corporate funding conditions showed a generally

deteriorated pattern as the growth of lending to small

and medium-sized companies slowed sharply and

delinquency rates rose. In particular, a credit crunch

emerged in the fourth quarter as the issuance of CPs

and corporate bonds by companies with low credit

ratings shrank sharply amid rising risk aversion in the

financial market.

Looking at the movements of monetary aggregates, the

growth rates of Lf, which indicates the liquidity of

financial institutions and of broad money M2 rose from

2007’s 10.2 percent and 11.2 percent, to 11.9 percent

and 14.3 percent respectively. This was ascribable to

(Figure 6) Major Market Interest Rates and Stock Price Index


2

3

4

5

6

7

800

1,000

1,200

1,400

1,600

1,800

2,200

2,000

(%) (1980.1.4 = 100)

2006 20082007

Call Rate (left scale)

Yields on CDs (left scale)

Yields on Treasury Bonds (left scale)

KOSPI (right scale)

Note1) Based on closing price2) Arbitrated rate of exchange released by Seoul Money Brokerage Services

(Figure 7) KRW exchange rate


600

800

1,000

1,200

1,400

1,600

1,800

600

800

1,000

1,200

1,400

1,600

1,800(won) (won)

2006 20082007

↓

won/dollar1)

won/100yen2)↑

12

●

Overview of Economy


the faster growth of private credit following an

increase in financial institutions’ lending, which offset

the effects of money absorption through the overseas

sector, resulting from the outflow of foreigners’

investment funds and the current account deficit. On

the other hand, the growth rate of narrow money M1

decreased by 1.8 percent in the first half because of the

decline of settlement-type deposits, including demand

deposits.

Outlook

In 2009 the world economy is expected to see its

growth rate drop sharply due to persistent unrest in

internat ional f inancial markets fo l lowing the

weakening of financial institutions in advanced

countries and the consequent spread of negative

effects to the real economy. IMF estimates that global

economic growth rate of 2009 will be -1.3 percent

which is the lowest since World War II.

The U.S. economy is anticipated to record a negative

growth for the first time since 1991. Personal consump-

tion and corporate investment will show marked

decline when, as foreseen, the financial markets

turmoil, the housing market slump and employment

sluggishness continue. Export growth will also be

decelerated due to the slowdown of global economy. To

observe by sector, personal consumption is expected to

diminish for the first time since 1980 due to the effects

of the worsening employment situation, the negative

asset effect from the decline of housing and stock

prices, the shrinkage of consumer confidence, etc.

Corporate investment will dwindle sharply due to

dampened investment spirits in the wake of the

economic slump and credit crunch. It is estimated that

investment for housing construction will continue to

decrease. The export growth will slacken owing to

overseas reduced demand, but imports will also be

sluggish in the year, so that net exports will be kept up

in 2009, contributing positively to economic growth,

albeit on a small scale.

The Chinese economy is expected to have its growth

rate lowered considerably owing to sluggish exports

under the impact of global economic slump, despite the

government’s measures to stimulate domestic demand.

Its consumption in 2009 will continue to grow thanks to

vigorous national policies to stimulate domestic

demand, such as expansion of distribution networks in

farm villages, extension of subsidy beneficiaries, and

exemption of income tax on interest. However, the

growth rate is estimated to drop somewhat due to

worsened situations in employment and income.

Investments for real estate and corporate facilities will

be inactive in the year; however, China will continue to

increase in fixed assets investments, as large-scale

infrastructure investments financed by the government

are planned. The export growth will be weakened as

overseas demand is to decline sharply following the

economic downturn in developed countries and

sluggish growth of emerging markets.

The Japanese economy is expected to record a

negative growth in 2009 as a result of a synchronized

downturn of domestic demand and export. Exports will

exhibit an accelerated decline as the slump of the U.S.

economy is likely to spread into emerging markets in

Asia. Private consumption in Japan will be inactive

owing to the deteriorating situations in employment

and income. However, it will not be worsened deeply in

2009 due to the help of strengthened real purchasing

power as consumer price inflation will be kept under

downward control. Sluggishness of facilities invest-

ment will deepen further as corporate profitability

deteriorates and cash flow dwindles following the

descent of stock prices and the rise of a stronger yen.

The recovery of housing investment will slackened a

little, and public investment will have its decreasing

rate slowed, thanks to economic policy measures, etc.

The Eurozone economy is expected to show a negative

growth in 2009 for the first time since the launch of

Euro currency, due to persistent deterioration of the

management environment in the wake of the financial

market unrest. By demand section, private consumption

will be slowed down as affected by a worsening

employment situation and negative assets effect,

following the descent of assets value. Fixed investment

in Eurozone countries is expected to decrease due to

dampened investment spirits under the impact of

prolonged economic uncertainty, deterioration of

corporate profitability, and application of more tight

criteria for lending, etc. Exports will also decline due to

a subdued demand by major trading partner countries.

13

●

Overview of Economy


Furthermore, the housing price bubbles have been

relatively high in the Euro-area, and consequently there

is a worry that the housing market slump and financial

market unrest will bring more serious impact to the

area.

In the international financial market, it is highly prob-

able that the U.S. dollar will maintain strong condi tions

against the Euro currency owing to the preference for

safe haven assets, settlement of de-leverage and carry

trade by financial institutions. However, there is a

different prospect in this regard that if the global

financial markets stabilize and economic recovery

begins during 2009, the U.S. dollar will shift to a

weaker trend, reflecting fundamentals of its economy.

As for the yuan, there is speculation that the Chinese

government may implement a devaluation of the yuan

on a relatively large scale in order to curb the export

slowdown caused by the global economic slump.

However it seems highly probable in view of the side

effects from currency devaluation, such as outflow of

foreign capital, and of the Chinese government’s efforts

made so far to internationalize the yuan, that it will be

depreciated only on a small scale or maintain stability.

During 2009 international oil prices are expected to

drop sharply compared to the previous year, as demand

will dwindle mainly in advanced countries and as

inflow of investment funds into the raw material

market will not be easy until the financial markets are

stabilized. However, considering that recently the level

of oil prices has fallen far below the marginal

production costs, and that consequent investments for

petroleum resources exploitation are being reduced or

cancelled, there exists a latent possibility that OPEC

will further cut oil production. Combined with other

concerns that may affect oil supply, such as the

persistent geopolitical unrest of major oil producing

countries like Nigeria and Iraq, the present circums-

tances involve a considerable uncertainty.

In 2009, the Korean economy is expected to record a

negative growth rate for the first time since the

outbreak of the foreign currency crisis, owing to a

synchronized slowdown in export and domestic demand

under the impact of the global economic slump.

Private consumption will decrease from 2008 as it is

foreseen that the purchasing power of households will

be weaker and more efforts will be made for saving

due to deteriorated employment situations. However,

low interest rates and the government’s measures to

stabilize livelihood and employment of the public will

act positively to restrain consumption shrinkage.

Regardless of the improvement of corporate funding

conditions (like low interest rates and a relaxed credit

crunch), the facilities investment will decline sharply

owing to worsened corporate profitabil ity and

dampened investment spirits. As for construction

investment, building construction may be sluggish due

to economic slowdown and housing market shrinkage,

but it is expected to rise slightly thanks to activated

civil construction in the public sector centering on SOC

investment. Exports (volume of goods basis) are

foreseen to fall back owing to a decreased overseas

demand as affected by the global economic slump,

trade-related financial strain and strengthened

protectionism. Imports (volume of goods basis) are

foreseen to decrease on a larger scale than exports

owing to a decline in oil prices and dwindling domestic

demand.

The current account in 2009 will probably be shifted to

a surplus from the deficit of the previous year. Surplus

in the goods account is foreseen to increase sharply,

and the accounts of service, incomes and transfer will

see a reduced deficit owing to lessened payment for

outbound travel.

The employment situation in Korea will deteriorate

owing to a weakened employment capacity in the

private sector, lowered profitability of small-sized

enterprises, etc. In the latter half of 2009, however, the

cut of the number employed will be slowed when the

revised supplementary budget is fully executed by the

government.

Consumer prices will exhibit a slackening of growth as

international raw material prices are stabilized down-

ward, owing to the global economic slump and ease of

demand pressure following a sluggish domestic

demand. In particular, commodity price inflation will be

restrained in the second quarter thanks to the mirror

effect of last year’s surge of international oil prices, and

thus the commodity price inflation will stand within the

target range (3.0±0.5%). However, the core inflation is

expected to be higher than the commodity price

increase rate, which is attributable to the upward trend

of industrial goods prices (except petroleum), which has

14

●

Overview of Economy


not slowed much due to an appreciation in the

ex change rate in effect since the latter half of 2008.

The financial market of Korea will show high variability

in view of decline in the real economy and persistent

concerns that the global financial unrest is unlikely to

be settled early. It is anticipated that funds inter-

mediation wil l not function smoothly in 2009.

Considering that domestic financial institutions lack

sufficient foreign currency liquidity and that they retain

relatively small capital, there are worries that the

institutions will be vulnerable to the turmoil of

international financial market. Therefore, if a new

impact arises in international financial markets such as

recurrent weakness in large financial institutions in

advanced nations, the Korean financial market may

show a high level of unrest accompanied by volatility in

domestic interest, stock prices, and foreign exchange. If

such a negative prospect is reflected, there is a distinct

possibility that in 2009 our economy will see an

increase in company bankruptcies, much decreased

investment and a worsened employment situation,

which will deteriorate growth potential and aggravate

unrest in the financial market.

Future economic policy shall be promoted in a way to

concentrate our capabilities on stimulating the domes-

tic demand such as consumption and investment, and

on creating job opportunities, lest the vicious circle of

low growth and sluggish employment should be

repeated. Efforts shall be made to expand the social

security network for low income groups and the

neglected class. In addition, special care should be

taken to clear any uncertainty in the financial markets

through swift measures of corporate restructuring, and

to make funds intermediation function smoothly

through an equity increase for financial institutions.

Measures to strengthen financial regulation and

oversight shall be prepared, as their necessity has been

ascertained in the course of reacting to the global

financial crisis which is still unfinished.

“The Korean Advertising Yearbook 2009” covers the latest consumer and marketing trends in South Korea. This publication has been praised for its insightful analyses coming from the extensive research done by industry experts in Korea; however, these values have not previously been available to the wider readers as the book was published in Korean only. We are pleased to announce that it is now available in English, and available in an easy-to-get digital format. It is believed that the book will be valuable for those interested in learning the latest marketing & advertising trends, and the consumer trends in Korea.

We believe this book will be useful for corporate executives and brand managers at multinational companies, global advertising agencies, and marketing professionals who are interested in the South Korean market. In particular, readers who are currently doing business in South Korea or who have an intention of introducing new products or advertising campaigns in South Korea and are seeking consumer insights and industry facts & forecasts will gain immediate value from this publication.

Table of ContentsPart 1. Advertising Market OverviewOverview of Economy/ Advertising Spending Analysis/ Trends in the Advertising Industry/ Marketing Trends in 2008/ Branding Trends 2008

Part 2. Analysis on Advertising MarketAbove the line: Television and Radio/ Newspapers/ Magazines/ Cable TV

Part 3. Analysis on Advertising MarketBelow the line (BTL): Sales Promotion/ Event Promotion/ Space Marketing/ Internet/ Public Relations/ Sports Marketing/ Culture Marketing

Part 4. Advertising-related Companies & OrganizationsAdvertising-related Companies & Organizations/ Advertising-related companies

Appendix. Korea's Advertising Related Statistics

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The korean advertising yearbook 2009